Abstracts
Finance that does not take sustainability seriously is finance that does not take finance seriously. The financial risks of the continued lack of sustainability brings sustainability into the heart of any well-founded financial decision, whatever view one might have on the role of finance and business in society.
In Europe and with knock-on effects globally, the EU’s sustainable finance initiative seeks to realise the potential of finance to contribute to necessary change in the real economy. In this draft chapter, I investigate the relationship between finance and sustainability. This entails a broad analysis of the risks of unsustainability, which go beyond the established recognition of the financial risks of climate change. Climate change has been declared code red for humanity, and horrific wildfires, droughts and floods underline that climate change is a serious risk increasingly is being realised with implications for all aspects of our economies and societies. Yet, what we face is a convergence of environmental, social and economic crises, calling for a mobilization of resources to deal with these crises across sectors.
Section 2 of this draft chapter gives a brief overview of the problematic aspects of the mainstream conceptualisation of financial risks of climate change, mentioning also briefly the ongoing development of a framework for financial risks of biodiversity loss. Section 3 introduces the research-based concept of sustainability that I employ as the framework for the analysis presented further on in the chapter. Section 4 presents the analysis of financial risks of unsustainability. I outline the physical risks of various environmental issues, and the transition risks of both environmental change and social aspects of unsustainability. Section 5 concludes with brief reflections on the necessity of and the legal basis for implementing a research-based approach to risks of unsustainability in law and policy reforms and in practice.
Preprint available at https://ssrn.com/abstract=4294693